What is a seagull spread and how do its three legs combine?

Question

AcadiFi · Accepted Answer

A seagull spread is a three-legged option strategy typically structured as a long call spread financed by a short OTM put, or a long put spread financed by a short OTM call.

Unlock with Scholar — $19/month

Get full access to all Q&A answers, practice question explanations, and progress tracking.

Start 7-Day Free Trial Compare Plans

No credit card required for free trial

The structure resembles a bird's silhouette when plotted: flat wings on both sides and a peaked body in the middle. Unlike fences which have one long and one short leg plus the underlying, seagulls are pure option structures. Commodities producers use bearish seagulls to hedge forward production: sell a far OTM call to monetize upside, buy a closer put spread to establish a price floor with a known deductible. Airlines use bullish seagulls on jet fuel. Counterparty risk and expiry timing must match physical delivery schedules to avoid basis mismatches.

What is a seagull spread and how do its three legs combine?

Master Level II with our CFA Course

Related Questions

Practice Questions